What’s a trillion dollars, or two, or 10, among friends? The U.S. government appears to be able to borrow any amount it wants without an adverse effect.
If this is true, if federal deficits don’t matter, then why do we bother with taxes? According to economist Stephanie Kelton, who supports modern monetary theory, we need taxes to take dollars from citizens when inflation runs hot, and to punish people who do things we don’t like, such as smoking.
Specifically, Kelton likes that taxes “remove dollars from our hands, so we can’t spend them,” leaving more purchasing power for the government. So taxes make the people poor, and that’s a selling point to her, presumably because she thinks governments are really good at lifting people out of poverty. Anybody who’s spent time in America’s inner cities, where government money is pretty much the only money, might disagree.
Ah, but it’s not just about spending our money more wisely than we ever could, Kelton adds two secondary reasons she loves taxes: to punish particular people by redistributing their money, and to punish people for doing things she doesn’t like such as failing to buy energy-efficient appliances (no, really).
In other words, social engineering with carrots for your friends and sticks for your not-so-friends.
With our government giving away trillions of dollars and, along the way, picking winners and losers, what’s the worst that could happen?